Inside Paytm’s international expansion plans

Indian mobile payments and e-commerce giant Paytm has a global market in its sights. The startup, whose peer-to-peer and consumer-to-business mobile payments app currently boasts 300 million customers in India, aims to onboard millions more around the world. As a first step, it's using Canada as a testing ground. "Paytm Canada is our beta test, or our warhead to get an entry into new geography beyond India," said founder and CEO Vijay Shekhar Sharma. Additionally, bill pay may help grow the customer base, but the company's vision is one of a full e-commerce payments marketplace. "Payments is a customer acquisition rail, but our real revenue product is when businesses pay us fees to accept payments," Sharma said. On Monday, the eight-year-old Alibaba-backed company added a feature allowing customers to top up their Paytm balances with cash at Canada Post nationwide (Alibaba and its affiliate Ant Financial have a majority stake in the company). So far, Paytm's Canadian efforts have focused on bill pay, though it plans to add retailers to the platform. In its home market, however, Paytm lets customers pay utility bills, make peer-to-peer payments, and pay for purchases wherever Paytm is accepted using QR codes. It also offers customers a cashback rewards scheme. The startup, which has had a Toronto-based tech team for three years, has been getting to know its Canadian demographic for the past year. Now, it's zeroing in on digital utility payments. "Right now, most companies allow you to put monthly charges on a credit card, but not every company, and definitely not every utility or government-run agency," said Kyle Prevost, a personal finance blogger at Canada-based youngandthrifty.ca. "This gap in the market represents Paytm's opportunity." To rectify this, Paytm has signed on thousands of Canadian bill payers, and it incentivizes customers with cashback offers of up to 3 percent. In addition, Sharma said he hopes to bring on board consumers who don't make digital bill payments -- which he said is as much as 30 percent of Canadian consumers. Paytm currently has 100,000 Canadian customers, according to the company. The company's choice of Canada, a market with a large Indian-origin population, is a way to build brand visibility through the migrant community, said David True, partner at PayGility advisers. Paytm Canada customers can use the app to pay bills in India, for example. "They may be trying to play on the diaspora; if you send money to a family member and can also use it to pay Canadian merchants, it becomes a multi-purpose app," True said. "The ability to drive customer adoption among the diaspora community may be the key to expansion opportunities int the U.S. and beyond, he added. Paytm had a significant market opportunity in India, but scaling in other markets has its challenges. In the U.S., for example, it comes up against large number of banks and other nascent digital payments and peer-to-peer systems like Apple Pay, Samsung Pay, and PayPal. "Walking into the U.S. market is a hotly contested environment," said Bryce VanDiver, a partner at Capco. Paytm "would need to make the case as to why the customer would leave the current service provider." While Paytm grew in India with the help of some strategic partnerships and acquisitions, it's not as easy to partner or acquire in other markets. That's because other jurisdictions already have established competitors, and opportunities for third parties aren't as appealing as they are in India, according to Jacob Morgan, senior analyst at Forrester Research. Given the complexity of international expansion, using a small market with fewer established players like Canada is a less risky way to learn about how to develop and expand product offerings. To succeed in new markets, one marketing strategy would be to focus on the consequences of easier payment experiences rather than the payment itself. "Their marketing narrative [in India] doesn’t sell payments -- instead they sell the 'need' to make payments -- to buy gold, pay school fees, utility bills, toll taxes, traffic tickets, and so on," said Arnav Gupta, a New Delhi-based researcher at Forrester. "Though these needs will differ depending on the geography and location ... at the end it’s all about completing a particular task than making a payment."